Coinbase CEO Brian Armstrong has fiercely criticized a leaked Senate Democrats’ proposal targeting decentralized finance (DeFi), calling it a “bad proposal” that could derail U.S. leadership in the crypto sector.
The new proposal imposes strict regulations, including a Treasury-managed restricted list for high-risk DeFi protocols and Know Your Customer (KYC) requirements for non-custodial wallets. In a latest post on X, Armstrong warned that these new measures will risk stifling innovation and driving development overseas.
Besides Armstrong, the proposal has sparked a widespread backlash from industry leaders, including Blockchain Association CEO Summer Mersinger, who argue it effectively bans DeFi and wallet development in the U.S.
“The disappointing proposal outlined by Senate Democrats would effectively ban decentralized finance, wallet development, and other applications in the United States – an outcome that’s neither workable nor consistent with American innovation,” said Blockchain Association CEO Summer Mersinger, adding, “The language as written is impossible to comply with and would drive responsible development overseas. We urge our policymakers to stay at the table, continue to engage each other across the aisle, and ensure this critical piece of legislation supports – rather than hinders – our nation’s leadership in financial technology.”
Armstrong, quoting Mersinger’s statement, emphasized that the U.S. risks losing its tradition of technological leadership if the legislation passes in its current form. Despite the setback, he expressed commitment to engaging with Congress to refine the bill and protect economic freedom.
The controversy has stalled bipartisan crypto market structure talks, with critics like Uniswap founder Hayden Adams echoing concerns that the Democratic counterproposal could “kill DeFi” in the U.S.
The timing coincides with heightened political tensions, as some speculate the move may be a strategic jab at the Trump administration amid its recent successes, including ending the Gaza war.
As the crypto community rallies against the proposal, the outcome of these negotiations could shape the future of DeFi globally. At this time, industry titans are vowing to fight for a regulatory framework that fosters innovation rather than suppression.
